Editor’s note: In addition to William Shrank, this post is also coauthored by Andrew Sussman, Patrick Gilligan, and Troyen Brennan.

The Centers for Medicare and Medicaid Services (CMS) recently issued a Request for Information (RFI) to solicit suggestions about how to improve the Accountable Care Organization (ACO) programs. CMS stated that they seek recommendations about how the ACO program might evolve to “encourage greater care integration and financial accountability.”

The RFI explicitly stated that they seek information about how to better integrate Part D expenditures into ACO cost calculations to make pharmaceuticals part of the approach to care delivery and health care transformation.

The deadline for comments about encouraging Part D integration in ACOs has now passed. But the issue extends beyond ACOs. In addition, bundled payments and patient-centered medical home programs target hospitals and primary care providers to promote higher quality and lower cost care. All these programs have largely excluded prescription drug costs in their calculus, and offer no direct incentives for Part D plans to participate in and improve care.

Nonetheless, retail pharmacies and Part D plans have developed a number of strategies to participate. As CMS and policymakers reconsider ACO regulations to stimulate greater integration of prescription drug use in delivery system reform, we thought it important to offer a description of the marketplace response to payment reform activities at large.

In this piece, we highlight the absence of direct incentives encouraging participation of Part D plans and pharmacists, present the rationale for the important role of pharmacy in payment reform, offer innovative approaches that Part D plans and retail pharmacies have implemented in the marketplace, and discuss future opportunities and directions.

The Blind Spot in Accountable Care: Pharmaceuticals

While reforms to the payment systems are fundamentally transforming incentives for providers, the cost and value of prescription drugs, in control of medical problems and expenses, were omitted. No new payment models, to date, target Part D directly. ACOs and other new payment models do not include the cost of pharmacy services in their measurement of total cost of care.

Considering that Part D plans are private firms and manage their own claims, the path to coordination of Part D with ACOs was not immediately clear when the ACO program was initiated. As a result, providers in these models have no meaningful incentive to promote cost-effective medication use.

Secondly, Part D plans are not able to share in the savings they produce through better outcomes for ACOs or, more generally, in Medicare A and B. Despite the fact that many Part D plans have substantial infrastructure to encourage greater adherence to therapy, there is no financial reason for them to invest in services that, if successful, will lead to increased spending against the fixed budgets that fund Part D plans.

Furthermore, medical savings accrue to government Part A and B programs. In addition, pharmacies and pharmacists do not have a straightforward way to be rewarded for the value they bring to chronic disease management. Pharmacists are not recognized by Medicare with “provider status,” limiting their opportunity for reimbursement for any services they deliver to patients.

The Importance of Pharmacy and Pharmaceuticals in the New Landscape

The role of appropriate use of prescription drugs will be central in realizing a vision of higher quality and lower cost care in this country. The overwhelming majority of health care costs are spent managing and preventing the consequences of chronic disease. Prescription drug therapy is the cornerstone of the management of most chronic conditions. Despite the substantial increase in generic prescription use, we continue to see overuse of unnecessarily expensive medications, even when guidelines would not support their use.

Yet, even more worrisome, we must address the issue of underuse of essential medications, as non-adherence with prescription regimens represents nearly a $300B problem annually in this country. Roughly half of all prescribed medications are not taken according to directions, even when offered at no charge to the patient, and nearly 25 percent are never initiated. Adherence to prescription medications has a profound impact on overall health, chronic disease management, and resultant medical expenses.

Efforts to improve medication delivery to increase the quality of care and reduce unnecessary costs requires a nuanced approach. Providers must focus their attention on both managing the “good trend” and the “bad trend” in pharmaceutical care. Providers must consider the value that pharmaceuticals offer, and must make rational prescribing decisions that optimize value, and develop programs to optimize patients’ use of these medications to obtain maximal health benefits. Efforts to improve medication use should both strive to curb unnecessary costs while also increasing the use of highly effective and cost-effective therapies.

There is a great deal that a pharmacy benefits manager (e.g. a Part D plan in Medicare) can do to promote higher quality and lower cost care. Part D plans can use innovative benefit designs and more restrictive formularies to promote efficiency. Innovation in benefit design can also realign incentives to promote greater adherence to therapy for cost-effective, especially generic, therapies. Similarly, Part D Plans can actively monitor patient purchasing data to identify patients who do not adhere to therapy, and intervene to communicate with patients and physicians from pharmacist call-centers to elevate awareness of pharmaceutical issues.

Moreover, it should be recognized that there also is a great deal a pharmacy can do to promote higher quality and lower of cost care. Pharmacies can use data to target patient care interventions, and identify pharmacists to deliver those interventions, to improve adherence and safety, to avoid readmissions, and to reduce total cost of care. There is clear evidence to suggest that pharmacists should be essential contributors to team-based approaches to improving adherence.

While the incentives may not be direct, there are a host of new “clients” for pharmacies and Part D plans: providers. Now that providers are taking risk for the health of populations, the providers have meaningful incentives to promote better pharmaceutical care. And Part D plans and pharmacies have moved quickly to develop a host of innovative programs and products to participate in providers’ efforts to deliver higher quality and lower cost care.

Most notably, Part D plans and retail pharmacies have rapidly engaged ACOs to offer programs to promote efficiency and improve quality. For example, SilverScripts, the Part D plan operated by CVS Caremark, offers ACOs one-sided shared savings on Part D drug costs. SilverScripts offers providers actionable, real-time pharmacy data, through a provider portal, about opportunities to manage unnecessary medication costs, and uses a shared savings model to return half of any savings that ACOs deliver back to the providers.

In such relationships, SilverScripts also offers real-time feedback to help providers manage “good trend” and support improvements in adherence. Numerous ACO partners have embraced efforts to improve adherence, even though they increase total drug costs, because the programs largely focus on highly effective, low-cost generic medications in the management of chronic disease, where the cost of medication therapy is low and the value is extremely high.

Part D plans can leverage their data to improve population health management. By regularly screening populations for evidence of non-adherence or safety concerns, they can proactively target outreach to patients before adverse events occur. These large datasets can also be leveraged to better assess an individual patient’s risk, and to better target interventions that can both improve health outcomes and reduce costs.

Part D plans and retail pharmacies are developing programs to support providers taking risk in a host of other ways. Any provider taking risk must be concerned with readmissions, which is compounded by recent CMS regulations penalizing hospitals with high readmission rates. Hospitals that participate in the Bundled Payments for Care Improvement model through CMMI are particularly susceptible to readmission costs. Medication non-adherence and misuse are central causes of readmission.

Retail pharmacies are offering a number of programs to reduce readmissions, from bedside delivery of prescription drugs at discharge, to promoting safe and appropriate use once a patient leaves the hospital, to home-based or telephonic pharmacist visits for medication reconciliation after discharge, to helping vulnerable patients navigate changes in therapy. CVS Caremark also offers home infusion services to help patients receive care in the lowest cost and most convenient setting, when appropriate.

A Vision for Better Integration of Pharmacy Services into Payment Reform

We applaud CMS for engaging the marketplace in a discussion around how to best organize ACOs to integrate pharmaceutical services into care delivery. Some will certainly call for a realignment of incentives in Part D plans, so that success in improving adherence and reducing health services utilization and total health care costs can be shared with Part D plans.

Others will call for more explicit consideration of prescription drug costs in ACO financial accountability. Still others will call for the opportunity for more exclusivity in the ACO-PDP relationship to support deeper and less fragmented medication improvement programs. Any of those would be welcome changes to the ACO program.

Regardless of the evolving ACO regulations, policymakers and providers must be aware of the innovative solutions that have arisen to meet the needs of providers in a new payment landscape to promote more efficient, appropriate and consistent use of medications. To be successful, the incentive structure cannot isolate medication costs, thereby focusing efforts to manage costs on reducing “bad trend” (without engaging providers in that charge) at the expense of promoting “good trend.”

Any policy solution must support a nuanced view of the value of medication therapy in improving health outcomes and reducing health care costs.